One highlight of the first day of the meeting of China’s National People’s Congress on Sunday was the announcement of the target for the country’s gross domestic product (GDP) growth and broad economic directions for 2023 by Premier Li Keqiang.
The growth target of around 5 per cent was modest by Chinese standards and below the expectations of most economists, and even of the International Monetary Fund (IMF), which projects China’s growth at 5.2 per cent in 2023. One reason for the government’s conservative forecast may be that it does not want the economy to underperform its growth target for a second year in a row, which might affect sentiment. In 2022, China’s economy grew by only 3 per cent against a target of 5.5 per cent. The target for 2023 is more realistic and achievable. Its downward revision may also reflect the fact that China’s economic recovery is still fragile. Notably, real estate, which accounts for about 30 per cent of GDP, remains weak, consumer and business confidence has yet to fully recover and export demand is softening as the economies of China’s major markets slow down in the face of interest rate hikes.